Getting to "yes" in a world of "no"…

I’ve just come back from being interviewed at an Innovation Warehouse meeting room by London OpenCoffee advice-meister Iqbal Gandham and ex-ZDNetter Andrew Swinton. Basically, they wanted to video my take on topics such as SEIS and startup funding, to act as a kind of antidote to the unwarranted ra-ra positivity that all too often fills the UK tech startup press.

It was a lot of fun to do, and I hope it does rapidly emerge onto the web in some form or other. Oh, and if you’re asking, I’m not bald, I get my hair cut that way. 🙂

Anyway, the big themes that emerged were:-

For a ‘typical’ UK tech startup, the basic cost of getting funded – in terms of research, travel, lunches, networking, pay-to-prepare, pay-to-prepare, pay-to-succeed, legals, etc – as of 2012 is surely not far off £25K. Are you surprised? Appalled? Both?

Worse still, the basic cost of not getting funded isn’t far off £15K, never mind the opportunity cost of that 9+ months of work you’ll never recoup. So… why not take your £15K – £25K and go out and do actual business with it instead?

Use your ingenuity and persistence to build up a real business, one brick at a time, where each brick is a customer.

Being an entrepreneur is 90% sales, 10% everything else. Tech entrepreneurs use phrases like “virality” to kid themselves the proportions might be the other way round, but they’re simply not – and they never have been.

So, unless you can actually demonstrate – to yourself, never mind to anyone else! – that you can sell stuff in the real world to real people, you’re basically a nontrepreneur. Yes, it’s a nasty, horrible word, for sure – but if thinking about it helps you to get real, then it’s also a bl*%dy great word.

In a nutshell, work out what you’re selling, physically go out and meet people who want that kind of thing, and sell to them.

Stop kidding yourself that tech trickery alone will be sufficient to get you to a huge market, it won’t.

Forget about emulating Facebook, Twitter, Google, LinkedIn, and eBay – if their ‘secret recipe’ for success could be bottled, we’d all be drinking the stuff. But there is no secret, so it can’t, so we’re not. So get over it!

Probably not what you wanted to hear, but there you go, it is what it is! Live long and prosper! 🙂

Michael: I believe the answer is under 2%, and also depends where you are. For example, even though Greater London has a higher density of business angels than the rest of the country, it has a much higher density of startups – so I believe that the funding success rate for London startups is less than 1%.

Michael: I should perhaps also add that it’s debatable whether the profits made by UK startups outweigh the cost of self-funding all those failed startups. I’m not sure that overall calculation – of whether tech startups are a net asset to the UK economy or a net liability – has ever been done: I suspect it’s far more closely balanced than anyone would like to admit. In those terms, the cost of failing to fund is a kind of “tax on optimism”, though I doubt many would like to see it presented that way. 😦

I agree the biggest problem I see with many startups is that they try to get funding right after they launch. They should first grow the business organically, grow their customer base, really get their name out there and then seek funding. It’s much easier that way.

Nathan: that’s right! What drives their search for early funding is the false presumption that the only way for ambitious startups to “go big” is via angel funding, which then causes them to structure their business plans around angel funding… a bad idea. Structure your business plans around your customers! 🙂